Extra Space (EXR) Q4 2025 Earnings Call Transcript

DATE

Friday, Feb. 20, 2026 at 1 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Joseph Margolis
• Chief Financial Officer — Jeffrey Norman

TAKEAWAYS

• Core FFO Growth — Extra Space Storage (EXR +3.18%) reported core FFO rose 2.5% for the quarter and 1.1% for the full year, reflecting resilience despite an evolving operating and supply landscape.
• Same-Store Revenue — Same-store revenue grew by 0.4% following sequential gains, with 16 of the top 20 markets posting positive new customer move-in rates, compared to only two markets that reached this metric earlier in the year.
• Same-Store NOI — Same-store net operating income increased 0.1%, with property tax expenses declining 3.4% and property operating expenses, including utilities, down over 5%, offset by rising healthcare and marketing costs.
• Capital Deployment — $141,000,000 in share repurchases averaged $129 per share; $305,000,000 was spent on 27 operating stores, contributing to a $826,000,000 full-year acquisition total.
• JV Transactions — Seven stores acquired for $107,000,000 and interests in nine properties sold, unlocking a $37,000,000 promote; JV structures remain a favored approach, especially where wholly owned deals are less attractive.
• Bridge Loan Portfolio — Originated $80,000,000 in bridge loans, bringing the portfolio to $1,500,000,000 by year-end.
• Third-Party Management Growth — Added 78 new managed stores with a net gain of 45 in the quarter and 281 net new stores for the year, expanding the managed portfolio to 1,856 stores.
• Expense Guidance — Expense growth is projected at 2%-3.5% for 2026, reflecting expectations for normalized property taxes and improved insurance costs, with discipline on other expense items.
• Same-Store Revenue and NOI Guidance — 2026 outlook is for same-store revenue of negative 0.5% to positive 1.5%, and same-store NOI of negative 2.25% to positive 1.25%.
• Core FFO Guidance — 2026 core FFO is expected to range from $8.05 to $8.35 per share, approximately flat compared to 2025 at the midpoint.
• Balance Sheet Positioning — 93% of debt is fixed rate (net of loan receivables) with a 4.3% weighted average interest rate; only one material maturity due in 2026 and a balanced maturity profile through the next decade.
• Commercial Paper Program — Launched in December 2024, this initiative saved over $3,000,000 in incremental interest and enhanced cash and capital management.
• Occupancy and Street Rate Trends — Mid-February occupancy was 92.5%, about 40 basis points lower year over year, with new customer rental rates increasing slightly above 6%.
• Discounting Strategy — Discounts are used selectively based on channel and data; online discounts are rarely offered as longstanding tests have shown little impact on long-term customer acquisition.
• AI and Technology Integration — Machine learning underpins pricing models and other operational functions; management expects AI’s role to expand in marketing, software development, call center operations, and support services.

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RISKS

• Chief Financial Officer Norman said, “There still will be pressure on the health care side. That is a headwind that I think all companies are facing,” indicating ongoing cost challenges in benefits.
• Occupancy was 92.5% in mid-February, about 40 basis points below the prior year, with management referencing a “headwind of approximately 40 basis points from pricing restrictions in Los Angeles County.”
• CEO Margolis stated, “with respect to New York, we were served with the complaint filed by the New York City Department of Consumer and Worker Protection. We disagree,” highlighting ongoing regulatory and litigation risks in that jurisdiction.

SUMMARY

Management described 2025 as a period of operational progress, highlighted by sequential gains in new customer move-in rates and revenue growth across most top markets. AI and technology were confirmed as integral components of long-term operating strategy, especially for pricing, marketing, and customer service. Balance sheet flexibility was emphasized through debt structure, commercial paper savings, and a deliberate preference for joint venture acquisitions in a competitive market environment. Management underscored cautious guidance for 2026, explicitly not including a significant rebound in the housing market, and maintaining measured expectations ahead of leasing seasonality. Supply was identified as incrementally easing, with expectations of modest improvement in same-store market deliveries.

• Management noted, “As always, we provide a range recognizing the number of factors that have evolved throughout the year,” highlighting flexibility in 2026 guidance outcomes.
• AI’s expanding role was reaffirmed, with CEO Margolis remarking, “we think it is going to be a big part of our operations, our technology stack in the future.”
• Chief Financial Officer Norman stated the revenue outlook, “Our core FFO range for 2026 is $8.05 to $8.35 per share, approximately flat on a year-over-year basis at the midpoint,” confirming muted growth expectations in the current market.
• Management described property tax and insurance cost normalization as primary contributors to lower 2026 expense growth guidance, compared to recent years affected by outsized increases.
• Regulatory focus remains elevated post-COVID, but CEO Margolis distinguished between disclosure mandates, which are already addressed by Extra Space Storage’s policy, and rate caps that remain largely unimplemented.

INDUSTRY GLOSSARY

• JV (Joint Venture): A partnership structure in which Extra Space Storage and one or more partners co-invest in self-storage assets, typically with Extra Space Storage taking a minority equity stake and sharing in returns, risk, and management.
• Bridge Loan: Short-term, higher-yielding lending provided to third-party storage operators or for asset acquisition, often with the option for Extra Space Storage to buy the property at or before loan maturity.
• NOI (Net Operating Income): Income from real estate operations after property-level expenses, excluding depreciation, interest, or company-level administrative costs; a primary measure of property performance in REITs.
• Core FFO (Funds from Operations): A REIT-specific performance metric excluding gains/losses on asset sales and other nonrecurring items, reflecting the cash generated by the company’s ongoing operations.
• Street Rate: The published rental rate offered to new self-storage customers, serving as a real-time indicator of pricing trends and demand strength.

Full Conference Call Transcript

Joseph Margolis, Chief Executive Officer. Thank you, Jared, and thank you, everyone, for joining today’s call. We delivered positive core FFO in the 2.5% and full-year core FFO growth of 1.1% despite challenging but improving operating and supply environments. Operationally, we continued to experience the trend of increasing new customer move-in rates while maintaining strong occupancy levels. In fact, in the fourth quarter, 16 of our top 20 markets experienced positive year-over-year move-in rates to new customers and sequential improvement in revenue growth, contributing to same-store revenue growth returning to positive 0.4% in the quarter. Only two of our top 20 markets reached this metric in 2024.

In the quarter, we also deployed capital strategically in a number of our investment and external growth channels. First, we took advantage of an opportunity to repurchase approximately $141,000,000 of our common shares at an average price of around $129. Second, we closed on 27 operating stores for $305,000,000, bringing our full-year total to 69 stores for $826,000,000. Third, we executed several high-value JV-related transactions, acquiring seven stores for a $107,000,000 gross, while selling our interest in nine JV properties and unlocking a $37,000,000 promote. Fourth, we originated $80,000,000 in bridge loans, growing the portfolio to approximately $1,500,000,000 at year end. And finally, we added 78 third-party managed stores with net growth of 45 stores in the quarter.

For the full year, we added 379 stores and 281 net new stores to the program, bringing our total managed portfolio to 1,856 stores. Our diversified external growth platform continues to provide us with opportunities across various channels, which we believe gives us an external growth advantage over all other industry participants. Overall, it was another solid year for Extra Space Storage Inc. We generated positive same-store revenue and FFO growth, and our external growth platform is firing on all cylinders. While only incremental, we are pleased to see progress in most of our markets.

Joseph Margolis: As they absorb the new supply that was delivered in the last few years. We feel better with regard to our positioning going into 2026 than we did heading into 2025, and in our ability to gradually accelerate performance as fundamentals continue to improve through 2026. I will now turn the time over to Jeffrey Norman.

Jeffrey Norman: Thanks, Joe, and hello, everyone. As Joe mentioned, we are pleased with the sequential improvement we have experienced in new customer rate growth, as well as seeing acceleration in our same-store revenue growth. We were also pleased to see improvement in our same-store operating expenses, which increased only 1.1% with several notable drivers. Property taxes declined 3.4% due to the expected normalization of prior year increases, and property operating expenses, including utilities, were down over 5%. These savings were partially offset by higher health care costs and elevated marketing expense. Our decision to invest more in marketing has been instrumental in driving our stronger move-in rates and positions us for revenue growth as we move through 2026.

The net result was same-store NOI growth of 0.1% for the quarter. Our low leverage balance sheet remains strong, with 93% of our total debt at fixed rates, net of loan receivables, and a weighted average interest rate of 4.3%. Our commercial paper program launched in December 2024 saved us over $3,000,000 in incremental interest expense during 2025 and has been another useful tool to optimize our cash management and reduce our cost of capital. We have only one material debt maturity in 2026 and a balanced maturity schedule over the next decade.

Our flexible and conservative balance sheet provides us access to many types of capital, and we have plenty of dry powder to efficiently execute on our growth strategy. In last night’s earnings release, we provided our 2026 outlook. Our guidance reflects our current visibility and represents a slow and steady recovery in storage fundamentals. We have not assumed any specific catalyst that could materially accelerate storage demand, or any material positive or negative changes in the economy. Specifically, we have not assumed a meaningful improvement in the housing market, nor a change to current pricing restrictions in Los Angeles County. With these factors in mind, our 2026 same-store revenue guidance is negative 0.5% to positive 1.5%.

Our expense growth range is 2% to 3.5%, reflecting disciplined cost management while maintaining strategic investments in our people, our properties, and our platform that drive long-term revenue growth. This results in same-store NOI of negative 2.25% to positive 1.25%. Our core FFO range for 2026 is $8.05 to $8.35 per share, approximately flat on a year-over-year basis at the midpoint. Our guidance assumes that average bridge loan balances remain generally flat as compared to 2025. It also assumes that most of our 2026 acquisitions will be completed in joint venture structures.

In summary, we are encouraged by our positive momentum in new customer move-in rates and same-store revenue, but it takes time for rate improvements to flow through our rent roll. Our stable occupancy and strong customer acquisition platform position us well to capitalize on demand as market fundamentals continue to improve in 2026. The combination of our operational strength, talented team, and diversified growth platform gives us confidence that we can continue to deliver long-term value for our shareholders through 2026 and beyond. With that, Miriam, let’s open it up for questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Michael Goldsmith of UBS. Your line is open. Please go ahead.

Michael Goldsmith: Afternoon. Thanks a lot for taking my question. First question is just on the same-store revenue guidance. You did 0.4% same-store revenue growth in the fourth quarter. The midpoint of the guidance calls for things to remain the same in 2026 at 0.5%. So, you know, recognizing that you have now had the benefit of street rates being positive and then that is starting to flow through. I guess I would have expected it to be a little bit higher. So can you kind of walk through kind of like what is the read on how we should interpret the midpoint of the guidance kind of expecting trends to remain kind of flat with where they currently are?

If there is any sort of seasonal cadence associated with that, that would be helpful.

Jeffrey Norman: Sure, Michael. Thanks for the question. You are right that at the midpoint, it really implies generally flat same-store revenue growth as compared to our exit in 2025. As always, we provide a range recognizing the number of factors that have evolved throughout the year. And to your point, at the higher end of our range, that would imply continued acceleration in 2026 and at the low end, some deceleration, generally flat at the midpoint as I mentioned.

And based on the trends we are seeing today with steady occupancy, improving and steady new customer rate growth, and a gradual year-over-year compression of the roll-down between move-out and move-in customers, it is setting itself up to provide a better fundamental outlook than we saw last year. All that said, the range does capture a number of potential outcomes, which include both acceleration or deceleration depending where you are in that range.

Michael Goldsmith: Thanks for that, Jeff. And maybe sticking with the trends you are seeing today, can you kind of give us an update with how street rate has trended through January and into February just to see if, you know, anything has changed in terms of demand environment or the existing customer into the new year, that would be helpful.

Joseph Margolis: Sure. So for the first 45 days of the year, we continue to see the trends we saw in the fourth quarter. Mid-February occupancy is 92.5%, about 40 bps down year over year, and rates to new customer up slightly over 6%. So all positive signals continue. Thank you very much, guys. Good luck in 2026.

Operator: Your next question comes from the line of Samir Khanal of BofA Securities. Your line is open. Please go ahead.

Samir Upadhyay Khanal: Good afternoon, everybody. Hey, Jeff. Maybe sticking to guidance here. On the expense side, it is like 2% to 3.5%. You go back last year and even the prior years, it has been higher. So I guess what gives you the confidence to kind of come out with that sort of lower range, this time of the year? Thanks.

Jeffrey Norman: Yeah. Thanks, Samir. The biggest needle mover as we compare it to 2025 is property taxes. As you know, for the first half of 2025, we had outsized property tax increases that impacted our full-year number, with that being the biggest driver of the expenses. We saw that normalize in Q3 and improve further in Q4, and we expect that to be at a more inflationary-type rate in 2026. That is the biggest factor. Insurance, which is running a little hot in Q3 and Q4. We have a midyear renewal. All indications are that the market is favorable. We would expect that to improve materially in the second half of the year.

And then most of the other line items, we have done a good job of containing and finding additional efficiencies and think those will be low single digits, if not better. So that, without getting to specific guidance line item by line item, gives you some of the big building blocks.

Samir Upadhyay Khanal: Got it. And the other line item that sort of stuck out was the acquisition volume guidance. I know you talked about dry powder, talked about external growth. But that level is lower than what you were guided to last year. Maybe provide more color on that and kind of broadly what you are seeing kind of on the transaction side. Thanks.

Joseph Margolis: Sure. So we expect in 2026 that most of our acquisitions will be done in a joint venture format where we put in a minority of the capital. So $200,000,000 of our capital may represent a much larger number of gross acquisitions. And that is because given where returns are in the market for deals, we would likely not be interested in many of them wholly owned on balance sheet, where if we do them in a joint venture structure, we can enhance the returns so they become accretive to our shareholders. I would also say it is a guidance number, and we have plenty of capital, sources of that.

If there are other opportunities, we will execute them and increase our guidance like we have for the last two years.

Jeffrey Norman: Thanks, Samir.

Operator: Your next question comes from the line of Brendan Lynch of Barclays. Your line is open. Please go ahead.

Brendan Lynch: Great. Thanks for taking my question. Joe, you started by saying that street rates are turning positive in 16 of 20 markets. That is certainly attractive progress there. But on the same-store NOI front, looks like a lot of about half of your markets are still in negative territory. How should we think about the transition of those kind of street rates improving and that finally flowing through down to same-store NOI and more markets converting to positive in the next couple quarters?

Joseph Margolis: Yes. I think it is a good question, and you kind of hinted at the answer. It does take time for new rates to flow into the rent roll. You know, we only churn 5%, maybe 5% to 6% of our customers a month. So it is really a forward indicator and not something that has immediate impact on our results. And from an NOI standpoint, property taxes in a lot of those markets that you are seeing in the 2025 numbers, were a pretty significant factor.

And with that being more muted, and we expect to be more muted in 2026, that is another positive driver as we think of how that flows through to NOI, where we do not anticipate the same headwind in some of those markets with outsized property tax growth.

Michael Griffin: Great. Thanks. That is helpful. And maybe another follow-up on the expense front. Jeff, you called out health care costs being a factor in the fourth quarter. We have heard a lot of your peers suggest the same. What is your expectation for that line item going forward in 2026?

Jeffrey Norman: Yeah. There still will be pressure on the health care side. That is a headwind that I think all companies are facing. On the other hand, we continue to find efficiencies in general payroll and staffing, which mutes it to some extent. So I do not provide specific numbers in terms of our budget, but overall, the total payroll line item is within our general expectation for expenses as a whole, driven by savings on the payroll side.

Michael Griffin: Great. Thanks for the color.

Operator: Next question comes from Salil Mehta of Green Street Advisors. Your line is open.

Salil Mehta: Hi, guys. Good afternoon, and thanks for taking my question. Just a quick one here to start off. Regarding California’s, I think it was Senate Bill 709 that went into effect earlier this year. Have you guys been able to see any, I guess, tangible changes in customer behavior or patterns as a result, I guess, of the forced extra disclosure that was mandated.

Joseph Margolis: So our disclosure pre-legislation was as robust as what they are requiring now. They wanted it in a different spot in the lease and a specific font and color. None of that made any difference. We had very robust disclosure before the bill, and now everybody has the similar disclosure and a more of a level playing field. And we have not seen any effect on our leasing activity in California.

Salil Mehta: Awesome. That is great to hear. And I guess a slight pivot here as a follow-up, but you mentioned that the guidance is not factoring in any housing recovery or any improvements in the macroeconomic environment. I guess more broadly speaking, what are the top macroeconomic drivers outside of home sales that you guys view could help provide a catalyst for this terrific industry? Are you guys tracking anything specific on both on a market or national level? Any color here would be super helpful.

Joseph Margolis: So a couple factors that we think are very important. One is job growth. I think job growth is highly correlated to self-storage performance, and it is one of the reasons that even though in 2025, our exposure to some Sunbelt markets was a headwind, that we believe our kind of proportional over compared to our peers to the Sunbelt is going to be a benefit to us, because in the future, we do believe that is where there will be outsized job growth. And then the other most important factor is, of course, supply.

And we see not that supply is going to zero, I do not think it will ever go to zero, new supply, but we do see a continued incremental reduction in new stores getting delivered.

Salil Mehta: Great. Thanks for the insight. That is it for me.

Joseph Margolis: Thanks, Salil.

Operator: Your next question comes from Michael Griffin of Evercore. Your line is open. Please go ahead.

Michael Griffin: Great. Thanks. Maybe to start, Joe, just on the interplay between rate and occupancy. I realize you guys are solving for revenue maximization. But just given that you have run at, call it, a higher elevated compared to the industry group, and it seems to be some pretty constructive commentary on the new customer rate growth side. Does now feel like the right time to lean more into pricing? Or how should we think about the push and pull between rate and occupancy to drive revenue this year?

Joseph Margolis: So I do not think you can think about it as we are leaning into occupancy or we are leaning into rate. Our algorithms price every unit type in every building every night, and will make those decisions as to whether to, to use your words, they want to lean a little bit into rate more, or whether they want to pull back to encourage more rentals on a unit-type-by-unit-type basis in every single building. So I cannot tell you that, you know, Jeff and I sit around the table and say, lean into rate, lean into occupancy. It is just not the way it works.

Michael Griffin: Certainly. That is some helpful context. Maybe just next, I know there was an earlier question just on the landscape, but there was some news out a couple of weeks ago, just related to stuff going on in New York. I realize there is probably only so much you can say. But maybe from a broader perspective, is kind of the regulatory onus more of a focus, a potential headwind as it relates to jurisdictions and municipalities, whether it is on capping rate increases or what have you this year? And how do you think Extra Space Storage Inc. is positioned to sort of maybe address some of the concerns out there as it relates to potential regulatory environment?

Joseph Margolis: Sure. Good question. So with respect to New York, we were served with the complaint filed by the New York City Department of Consumer and Worker Protection. We disagree with the allegations in the complaint. To give you context, the complaint cites 117 consumer complaints over a three-year period having to do with our 60 properties in New York City. So we have well over 100,000 customers in that time frame. So 0.1% of our customers issued a complaint to the city. We will defend ourselves vigorously, and because it is active litigation, I really cannot say anymore.

With respect to the broader question about regulatory patterns, we certainly have seen post-COVID an increase in regulation and proposed or attempted regulation of the self-storage industry. There have been a few jurisdictions that have proposed price caps, as you suggest, but none of those have been implemented. And I think that is a piece of legislation that is difficult to get passed. I think what is more common is disclosure legislation. That has been successful in many states. And as I said earlier, in many ways, we welcome that, because we believe our disclosure is very robust, best in class.

And to the extent certain disclosure has to be codified that everyone has to do it, that could be a good thing for us.

Michael Griffin: Great. That is it for me. Thanks for the time.

Jeffrey Norman: Thanks, Michael.

Operator: Your next question comes from Eric Wolfe of Citi. Your line is open. Please go ahead.

Eric Wolfe: Hey. Thanks. As far as your same-store revenue guidance, maybe just try to maximize your same-store revenue, and you are not going to guide specifics on occupancy versus rate because it is the combination of the two. But as part of your guidance, you seem to at least be assuming that this current trend of 6% move-in rate growth comes down materially. I think that sort of has to be the case to get to your guidance. First, is that the right conclusion that you are assuming that move-in rate growth comes down? And then second, what would cause that? Is it the comps getting more difficult? Demand indicators just sort of flattish? Like, what would actually cause that?

Jeffrey Norman: Yeah, Eric. Thanks for the question. As you acknowledge in your question, we do not assume that all factors remain equal. So as you talk through it, of course, increases and decreases in occupancy, increases in rates are all factors. But in your scenario referring to rates specifically, if we were to try to isolate that, certainly, lapping comps does become more difficult as you move particularly to the back half of the year. So, I mean, that would be a reasonable assumption. But as Joe led with, we are okay if we are driving revenue growth through any of those—any of those levers.

So we do provide the range partially to recognize each of those factors and that some could be stronger or weaker. We are also mindful of the fact that you have a headwind of approximately 40 basis points from pricing restrictions in Los Angeles County. So those are all things that we are thinking through as we come up with our range.

Eric Wolfe: Got it. And that 40 basis points on LA, is that like, a dilution? Like, what it would be doing versus what it will actually do and maybe you could just share what your actual forecast is for LA in terms of sort of actual same-store revenue. So you are forecasting it for 2026. Like, what is the number that you expected to end up at for the year?

Jeffrey Norman: No. The question, we do not guide at the market level or disclose that at the market level. But you are right that is dilution versus what we would have expected growth to be in those markets absent those restrictions.

Eric Wolfe: Okay.

Joseph Margolis: Thank you.

Operator: Your next question comes from the line of Ravi Vaidya of Mizuho. Your line is open. Please go ahead.

Ravi Vaidya: Hi there. Thanks for taking my question. Can you offer color on your discounting strategy in the broader promotional environment in 4Q? And what do you have embedded in the guide from a discounting and promotional standpoint? Thanks.

Joseph Margolis: So our discounting strategy is channel-based, based on testing and research we have done for a number of years. So online, we seldom offer discounts, discounts being one month free or $1 for the first month, because all of our data is very clear that long-term customers seeking storage on the web do not respond well to that. We do selectively offer discounts in the stores depending on unit type, occupancy, and other factors, and we will continue to do so. I do not envision any change in our discounting strategy until the data tells us there is a reason to.

Ravi Vaidya: Got it. That is really helpful. Just one more here. Can you describe how your team is using AI or any agentic technologies and maybe how that is an opportunity to lower marketing expense or any other operating expenses? Thanks.

Joseph Margolis: Sure. So we kind of think about AI in two big buckets: external use of AI and internal use of AI. And externally, AI’s influence on traditional search is real and rapidly changing. We are staying very close to it. So far, the factors, the metrics that make us and other large companies successful in the SEO landscape are the same, seem to be the same factors and metrics that make a company successful in the Google AIO or ChatGPT landscape. So this is something that we and the other large companies, frankly, have the expertise, technology, focus, and resources to stay close to.

And I think it is going to be a factor that continues to provide advantages to large companies and differentiates us from most of the industry and allows us to continue to consolidate the industry. On the internal side, we have had machine learning in our pricing models, as I referenced earlier, for years and years and years. Also being used to help with marketing spend, software development, certain areas of the call center. I can see it in the future helping us at the help desk, contact management, operations. So lots and lots of use cases.

We formed an internal platform team to help us make sure that we step into this in a prudent manner and also kind of vet and triage the dozens and dozens of potential opportunities that are coming up. So we think it is going to be a big part of our operations, our technology stack in the future. We think it will create—

Jeffrey Norman: Appreciate it. Thank you. Thanks, Ravi.

Operator: Your next question comes from Todd Thomas of KeyBanc Capital Markets. Your line is open. Please go ahead.

Todd Michael Thomas: Hi. Thank you. I just wanted to first follow-up on the revenue growth forecast and some of the comments made earlier. Is the base case for guidance at the midpoint, is that currently sort of assuming a stronger first half and a moderating growth rate in the second half of the year as the comps get a little bit more difficult? Is that sort of the right way to think about it based on your comments?

Jeffrey Norman: Good question, Todd. As you can tell by the full range, the growth is still pretty flat. Right? You are at a high end of 1.5%. Seasonality may impact that 10 to 20 basis points either direction as you move throughout the range or throughout the year, excuse me. But that might be as much of a factor as the previous year’s comp as anything. I would not read into that too much. I would look at it more as gradual, slow, and steady growth. But to your point, recognizing that you lap more challenging comps as you get deeper into the year.

Todd Michael Thomas: Okay. And then, Joe, you mentioned job growth as an important factor for demand. You talked about Sunbelt job growth being a favorable long-term factor. New York, Southern California, Miami, San Francisco have been some of the higher performer markets. I realize some of that is Sunbelt, but they have been sort of some of the higher performer markets, teams with sequential revenue growth really leading the way. Do you expect to see those markets continue to perform or outperform in 2026? Or do you think that you will see some of the other Sunbelt markets really take the lead next year? Or is it just more of a gradual recovery process in some of the other markets?

Joseph Margolis: I think it is more of a gradual recovery process. I think the correlation between market performance in 2025 in particular has to do with supply. The thing that muted Sunbelt market performance, many Sunbelt market performance, was oversupply. And many of the markets that you mentioned did not have that factor. So one thing we know looking back and the long-term trends market by market is market performance is cyclical. It is really difficult to find correlations between markets. Therefore, our strategy of having a broadly diversified portfolio with exposure to as many growth markets as we can. And one factor is how has the market done the last two years? Right?

Atlanta has been a difficult market because we had several years of double-digit revenue growth. So now it is on the other side of the thing. So markets will cycle between overperformance and underperformance, and having a broadly diversified portfolio can somewhat smooth out that return series.

Todd Michael Thomas: Okay. Thank you.

Joseph Margolis: Thank you, Todd.

Operator: Your next question comes from the line of Ronald Kamdem of Morgan Stanley. Line is open. Please go ahead.

Ronald Kamdem: Good afternoon. I have a question regarding your ECRI strategy. So you previously mentioned that your ability to drive increases is somewhat limited until street rates start to increase. So what is the average magnitude of increases, sent to customers today, versus this time last year and what is your kind of base case assumption for ECRI contribution to same-store revenue growth in 2026, and how does it compare to 2025?

Jeffrey Norman: So, Ronald, we do not disclose specifics around the program. We do that as competitive advantage and part of our overall revenue strategy, but we do not see it changing materially on a year-over-year basis. So at the portfolio level, contribution should be generally similar with the one caveat being Los Angeles County.

Ronald Kamdem: Got it. Then, can you provide some additional details on that 26 properties that you sold during the quarter? So probably some details on pricing and the bidding process overall. And are you largely done with kind of overall portfolio optimization, or you may consider to sell something as well in 2026 and 2027?

Joseph Margolis: I think we will sell a small number of properties every year as we seek to optimize the portfolio and improve our market exposure dynamics. We had a greater number of sales in 2025 largely because of the 22 former Life Storage assets that we sold. And that was part of the original plan when we merged with Life Storage. We wanted, with certain select assets, to improve the NOI, improve the asset, get beyond the two-year period, and sell them because we did not think they had the growth characteristics that were attractive to us. They required capital that we did not think we could get a return on, or for market positioning reasoning.

So we put that portfolio on the market. We got bids. We executed the sale at a market cap rate for the quality of assets that they were. And they were not the best assets in our portfolio. And we successfully reinvested the capital. We bought stock, we made bridge loans, and we did over $300,000,000 worth of portfolio acquisitions in the fourth quarter. I cannot give particular cap rate or pricing because of our arrangement with the seller. But it was a market transaction.

Jeffrey Norman: Got it. Thank you.

Operator: Your next question comes from the line of Caitlin Burrows of Goldman Sachs. Your line is open. Please go ahead.

Caitlin Burrows: Hi, everyone. You mentioned that you expect continued incremental reduction in new stores getting built. So wondering if you can give more details on your supply expectations, which markets are more versus less exposed, and also which data source informs that view?

Joseph Margolis: So we would start with Yardi, which is a national database and might have a little different opinion. We take that data, and we apply it only to the markets that we are active in. Right? So we do not care what is getting built in North Dakota, for example. And then we use other data that we have through our people on the ground, our investments team, our management team. And when we look at the stores that we expect to be delivered in 2026 in our same-store markets, it is an incremental step down. Very modest step down, but a step down. I would also say that when you look, Yardi does a great job.

We think they are the best data source in the industry. I am not criticizing Yardi. But I think it is hard for them when projects get canceled for them to take it off of their list. They are sometimes behind on taking stores off their list that are—do not go forward. We have seen historically the amount of stores being delivered is always somewhat less than what was predicted. So we think that the situation will get incrementally better. And the markets are the same markets. It is the Sunbelt markets that have a lot of this built: Northern New Jersey, Las Vegas, Phoenix, and Atlanta. I guess that is a Sunbelt market.

So they are not going to automatically get where there is no supply, but it will be incrementally better over time.

Caitlin Burrows: Got it. Okay. And then also on your comments that you feel better going into 2026 than 2025, I am guessing that incremental improvement to supply is part of it. But is there anything else you can comment on what is driving that? And is there a certain line item in your guidance that reflects that confidence? Because it looks like the full-year 2025 same-store revenue and same-store NOI results are within the 2026 guidance range. So just wondering if that improved feeling is reflected in guidance or not necessarily.

Joseph Margolis: So I think the biggest difference between going into 2025 and going into 2026 is going into 2025, we were still experiencing every month negative new rates to customers. And now we have turned that corner for a number of months and that pattern has certainly established itself. So that, and the supply situation, has certainly helped us feel better going into 2026. With respect to our guidance, we have gotten a lot of questions about that. It is really hard prior to the leasing season to be fully optimistic and fully bake these trends into your guidance. We have had two years where we did not have the leasing season that we expected.

And until we get to that point where we know what the leasing season is going to be like, we are going to remain somewhat cautious.

Caitlin Burrows: Got it. Thank you.

Jeffrey Norman: Thanks, Caitlin.

Operator: If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Your next question comes from the line of Ronald Kamdem of Morgan Stanley. Your line is open. Please go ahead.

Ronald Kamdem: Great. Just two quick ones. One is on the operating platform. I think you guys have taken the philosophy that having people at the stores and sort of managing sales, I should say, is going to sort of bear fruit. So I just want to hear a little bit more about how you guys think about the potential to replace people in the long-term role in the platform, and two, any other sort of big changes that you are thinking through about on the platform to be able to reaccelerate growth?

Joseph Margolis: So our philosophy is that we want to let the customer choose how to do business with us. And the customer cannot choose how to do business with us if we close certain channels to them. So right now, we allow the customer to interact with us online, at the call center, or at the store. And 31% of our leases are from customers who walk into the store and have not interacted with us online or on the phone. So if we take those people out of the store, those customers all have a cell phone. They all have a computer. They all could choose to interact with us that way.

But they want to go to the store for a reason. And if they get to the store and there is no one there, maybe they will scan the QR code. Maybe they will go online. Or maybe they will go across the street to the competitor. And you do not need to lose too many rentals in a high-margin business where your expense savings is overshadowed by the loss of revenue.

So as long as the customers are telling us they want to talk to a store manager—31% of our tenants walk into the store, 5% of our tenants start online, reserve a unit, but will not sign a lease until they go to the store, see the unit, and talk to the store manager; 8% call the call center, make a reservation, but will not sign a lease until they go to a store and talk to a store manager—the store manager is a very, very important part of our process.

In addition, the store manager helps keep the store clean, helps prevent break-ins, helps prevent people from living there, helps prevent the mattress from being left in the drive aisle. The asset is taken care of better when there is a human being there. And one reason our management business is growing much faster than competitors who do not use store managers is because people want people; they want store managers in their valuable assets. So we believe this very strongly. It is why we have a higher occupancy rate, I believe, at higher rents than our competitors.

That being said, there are ways to find efficiencies, and we are looking and testing for different ways to reduce the number of hours. But I do not, until the customers tell us they only want to interact digitally, I do not foresee a future where we have no store manager.

Ronald Kamdem: Super helpful. I want to come back to the operating expense question because it was sort of lower than we anticipated as well. I think you hit on the insurance and maybe you sort of talked about property taxes as well. But maybe can you talk through sort of marketing spend and some of the other line items that are getting you to that guidance? Thanks.

Jeffrey Norman: Ron, I think you hit two of the biggest ones in terms of primary drivers of growth in 2026, at least as we anticipate in our guidance. And then marketing is the, I would say, the variable expense. And as we have talked about before, we really view that as a revenue driver. So it is a line item that we are happy to pull back on if we are not getting the returns we want and still see healthy transaction volume. On the other hand, it is one that we are also happy to lean into and spend more, because it is a pretty direct return that we can calculate.

So I would say that is probably your risk factor, Ron, to the positive and to the negative, is marketing expense. And then on the margins, property taxes, just because of the magnitude of the total expense load that they contribute. The rest, I would say, would definitely be inflationary. Sorry about that.

Ronald Kamdem: Helpful. Thank you.

Joseph Margolis: Thanks, Ron.

Operator: Your final question comes from Michael Mueller of JPMorgan. Your line is open. Please go ahead.

Michael William Mueller: Hi. It is Vanilla here. Thank you for taking my question. On the bridge loans, it looks like you guys have gone through the majority of your backlog of bridge loans. Considering the balance is expected to be generally flat in 2026, should we expect the balance to decline beyond 2026, or do you have meaningful activity there to keep it consistent?

Jeffrey Norman: Yes. Thank you for the question. We are intentionally guiding to maintaining relatively flat balances. That is not necessarily because there is a lack of volume to keep originating loans. But we have a really flexible structure where we can choose how much of the loan to retain. So if we see higher volume, we can sell more of our mortgage notes and just retain the higher yielding mezzanine piece, or we can retain both. So we are confident we can retain those balances at this level based on the origination activity we have seen. We have also seen that a lot of these loans—or borrowers exercise extensions.

We see that oftentimes, at or before maturity, we are buying these assets. So it serves as an acquisition pipeline for us, so we are happy to participate in the industry in any way we can. To partner with other storage participants. This is just another good tool that helps bring in management, it sources future acquisitions, and provides a solid return along the way.

Michael William Mueller: Okay. Perfect. Thank you. That is it for me.

Jeffrey Norman: Thank you.

Operator: There are no further questions at this time. I will now turn the call over to Joseph Margolis, Chief Executive Officer, for closing remarks.

Joseph Margolis: Thank you all for the questions. Good conversation. We appreciate your interest in Extra Space Storage Inc. and look forward to reporting to you throughout the year how we do on our guidance. Thank you, and have a great day.

Operator: This concludes today’s call. Thank you for attending. You may now disconnect.